Market Report

After the recent height of sterling against most currencies, soft UK housing figures has signalled that recent interest rate hikes are slowly taking effect within this sector. We are seeing slight sterling weakness on the back of this.

Even with poor US housing figures, we have seen, what I feel, is temporary strength for Dollar. With literally an economic breakdown in the States I think there is a lot more weakness ahead for the Greenback.

Well, like the predictions with the weather, I think we could see a sterling improvement over the coming weeks

LR

The dollar traded near the strongest in more than two weeks against the Euro on speculation the world's biggest economy can withstand rising mortgage defaults. The currency may extend a rebound from a record low against the Euro and a 26-year low versus the British pound before a report tomorrow that economists forecast will show the U.S. economy grew at the fastest pace in more than a year in the second quarter.

New Zealand's dollar had the biggest slide in a month and bonds rose after central bank Governor Alan Bollard signaled an interest-rate increase today may be the last. The local dollar fell against all of the 16 most-active currencies as Bollard said a 1 percentage point move in rates this year to a record 8.25 percent should be enough to contain inflation.

VC

Sterling hit its highest level against the Dollar in 26 years on Monday, as it benefited from broad dollar weakness and expectations for British interest rates to rise further this year.

Sterling was bolstered last week by data showing the British economy had grown faster than expected in the second quarter, backing expectations for British borrowing costs to rise further from the current 5.75 percent.

Yesterdays data from property website Rightmove data showed an easing of house price inflation in England and Wales in July failed to dent the bullish sentiment built by the GDP data. But with a lack of further British or U.S. data on Monday, momentum was driven by lingering worries that problems in the U.S. subprime mortgage market -- catering for borrowers with poor credit histories -- might spread to the wider U.S. economy, impacting growth and hitting the dollar.

Five rate hikes since last August have seen the pound benefit strongly from its higher-yielding status as a "target" currency for the carry trade, where investors borrow in low-yielding units like the yen to fund higher-return assets.

British interest rates of 5.75 percent are already the highest among Group of Seven countries and a slim majority of economists polled expect rates to hit 6 percent by year-end.

Looking ahead, today British industrial orders data is due at 11.00 and is expected to exhibit a mild consolidation from June's 12-year high, to +3 in July, from +8 and Bank of England Deputy Governor John Gieve is expected to make a speech in London.

Have a good day!

DH

Unfortunately or fortunately, depending on who you are and what you want to get out of the currency markets, there is very little economic data being released this week.

In the US later in the week we have the GDP figures on Friday, as well as Junes home sales and the FED's beige book on Wednesday.

In Europe we have ECB President Trichet speaking at a conference on globalisation, and later in the week the German IFO business climate index.

England need to hope that the weather stays good today to ensure they get the last 7 wickets needed. I hope this week will not fizzle out like the Test match is about to!!

DE

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